Market returns to 'settle down'

2014 is unlikely to see 2013 growth

Dec. 2, 2013

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Written by

Jamie McGee

The Tennessean

For those reaping the rewards of a thriving stock market this year, don’t expect to duplicate returns in 2014, said Jim Russell, senior equity strategist for U.S. Bank.

The S&P 500 has climbed almost 30 percent in 2013 and the Dow Jones Industrial Index has gained 25 percent, breaking 16,000 for the first time.

“We think it probably settles down, and we look for a much more modest type of market environment in 2014,” said Russell, who is based in Cincinnati. “We think very much that 2013 was a catch-up year and that will not be sustained in 2014.”

While stock prices have increased significantly, earnings gains have been more measured, climbing about 5 percent, Russell said, adding that he expects the price-to-earnings ratio to stay steady after climbing to 16.5 from 12 this year. He is calling for 7 to 9 percent gains in equity markets next year.

Russell also recommends investors look to European and international stocks in 2014 as those will likely do better than they have in previous years as Europe emerges from its recession.

“The international markets, up until this point, have not provided strong return scenarios for our clients,” he said. “We do think that tide is turning.”